Dutch pension funds have sold €88 billion in investments in the first half of 2022, according to pension regulator De Nederlandsche Bank (DNB). Most of the assets sold were equities. The sales amounted to some 4.6% of total pension assets in the country, DNB said. Never before had pension funds sold such a large amount of investments in a six-month period.
Part of the proceeds were part of rebalancing and part were used to fund margin calls on derivatives contracts. Since interest rates started moving upwards at the start of this year, funds are required to pay collateral.
“The net market value of our clients’ derivative positions is now net negative for the first time,” said derivatives specialist Max Verheijen of Cardano, cited by IPE Magazine. “However, the fall in liabilities has been even greater, meaning funding ratios have improved dramatically.”
According to DNB, pension funds have paid €82 billion in collateral this year, which has been partly funded with the cash raised with the aforementioned asset sales.
Most pension funds can use bonds as collateral, said Verheijen to IPE. “If they can’t – for example when using central clearing – then selling equities to raise cash for collateral is only logical if you had wanted to sell these assets anyway, for example if you want to rebalance your investment portfolio. It’s a better alternative to use the repo market, where one can generate cash cheaply by using bonds as collateral.”